The average stock in the for-profit education sector fell 24%, even as the S&P 500 rebounded 9.7%.

Robert C. Wetenhall, equity analyst at RBC Capital Markets, noted that 2010 was a particularly challenging year for for-profit postsecondary education providers. His research showed that $1 invested in the for-profit education sector at the start of 2010 would now be worth just 73 cents; by contrast, the same dollar would be worth $1.06 had it been invest in the S&P 500.

The S&P 1500 Education Index, which tracks the industry, dove 34% from June through August, a retreat that began after the Obama administration announced June 16 that it would seek regulations aimed at stanching for-profit schools' high rate of student-loan defaults and curbing their aggressive marketing practices.

"In general, career advancer schools that have a robust consumer value proposition in which graduates typically obtain a promotion or a pay raise fared better than career switcher schools which focus more on retraining unemployed workers for new careers," the analyst wrote.

For-profit education sector strength in recent years, particularly in 2007 and 2008, "reflects the counter-cyclical nature of the for-profit education industry, which historically achieves faster enrollment growth when the economy starts to weaken," Wetenhall said, adding that continued "high unemployment should provide a tailwind which will help companies in our coverage universe either meet or exceed challenging enrollment comparisons."

The Obama administration proposed regulations that cover everything from restricting incentive-based recruiting practices, the need for new job-training courses, and taking action against schools which fail to advertise honestly to requiring schools to notify students of graduation and job placement rates. Institutions will also be required to limit student enrollment to those who have high school diplomas or can readily demonstrate their readiness for university-level education. Schools must also comply with what is called the 90:10 rule in fiscal 2012. The rule stipulates that no more than 90% of a for-profit education provider's revenue may be generated from Department of Education's federal student aid program.

Arguably the most controversial of the proposed regulations, known as the "gainful employment" rule, expected to be issued early in 2011, would cut federal aid to schools where less than 45% of students are able to repay their loans. Federal aid to for-profit education providers came to nearly $150 billion in the last academic year.

The gainful employment rule will consist of a two-part measurement to determine a program's eligibility to receive federal student aid. The measurement is based on loan repayment rates and debt-to-income ratios, and requires a minimum of four years of repayment history and three years of employment history. The rules would go into effect in the middle of next year.

The Institute for College Access and Success, a student-advocacy group, said in August that its research showed nearly two-thirds of for-profit colleges' students were not repaying their loans .

Here then is a roundup of 2010 winners and losers in the for-profit education sector, ranked by year-to-date share price returns, from bad to good.

(Stock quotes are based on closing prices on Dec. 7, 2010.)

Corinthian Colleges

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Corinthian Colleges ranked among the worst-performing stocks in the for-profit education sector in 2010, underperforming not only the sector but the overall equity markets as well. The operator of Everest, WyoTech, and Heald colleges averaged student loan repayment rates in the low 20s in 2009, meaning it could lose its eligibility for federal aid for student loans. The company said in August it would limit enrollment of new students more likely to default on their loans at some of its colleges, but high-risk students accounted for almost 15% of its total student population in the prior quarter.

Corinthian said it was evaluating a fee hike to comply with the education department's 90:10 rule.

Total student population was 21.7% higher in its fiscal first quarter, ended Sept. 30. On a pro forma basis, total student population increased 7.7%. Total new students increased by 11.8%. On a pro forma basis the growth was 0.5%.

Corinthian said it was working to "help improve student outcomes, reduce the risk profile of our student population, and ensure regulatory compliance." The school operator stopped enrolling ability-to-benefit students (ATB) at its Everest and WyoTech campuses "to help meet federal cohort default rate requirements," said CEO Peter Waller. "ATB students do not have a high school diploma and have higher default rates than high school graduates."

Waller said that "the lack of ATB enrollments has negatively affected growth in the Everest ground schools, created marketing inefficiencies, and pressured operating margins." The CEO said Corinthian "will experience the full impact of the ATB decision on new student enrollment beginning in the December quarter of the current fiscal year."

On Nov. 30 Corinthian Waller resigned after less than two years on the job . His sudden departure marked the second executive exit in as many months after Corinthian announced the resignation of another top executive, then president and COO Matt Ouimet .

The board tapped chairman Jack Massimino, who served as chief executive from Nov. 2004 through July 2009, to resume the role of CEO, effective immediately. Massimino will continue to serve as chairman. A replacement for Ouimet has not been named.

Analysts at Barclays cut Corinthian's price target by a dollar to $4. The firm maintained an equal weight rating on the stock. RBC's Wetenhall maintained an underperform rating and $5 price target on COCO shares.

Current quarter enrollment is expected at 101,609, compared with year-earlier enrollment of 93,152. Fiscal second quarter revenue is expected to come in at $476.3 million, up from $414 million in the fourth quarter of 2009, even as earnings per share are expected to fall 50% to 22 cents.

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Apollo warned in October that student enrollment would be down more than 40% in fiscal 2011's first and second quarters , after falling 10% in the fourth quarter, ended Aug. 31. Apollo withdrew its earnings outlook and warned it would fall out of compliance with the 90:10 rule in fiscal 2012.

Apollo, the parent company of University of Phoenix, Institute for Professional Development, College for Financial Planning Institutes and Meritus University, would have to increase its tuition rates if access to federal aid is cut off, further inhibiting student enrollment. "What a disaster," said Sterne Agee & Leach analyst Arvind Bhatia at the time. "The industry is starting to see some signs of more meaningful slowdown than anyone had expected two months ago."

One reason for the significant decline in student enrollment is Apollo's implementation of a mandatory three-week orientation, beginning Nov. 1, for all new students enrolling at University of Phoenix with fewer than 24 transfer credits. The program -- which Apollo said results in about 20% of new students leaving the school before classes even begin -- should help to counter criticisms that Apollo and its for-profit education peers leave students with hefty loans but without qualifications for meaningful employment.

The Education Trust, a non-profit student advocacy organization, released a report in November showing that six-year graduation rates at University of Phoenix, the largest for-profit college in the U.S., were just 9%. Broken down by campus, University of Phoenix's online campus, its largest by enrollment with more than 175,000 students, had the lowest six-year grad rate at just 5%. Students were most successful at its New Mexico campus, where 33% of students could expect to graduate.

On Dec. 1 Apollo confirmed that it would lay off 700 employees at its University of Phoenix facilities, mainly in the school's admissions personnel department. The move may reflect a realization that expected restrictions on incentive-based recruiting practices -- part of the proposed for-profit education industry regulation -- would limit its need for such a large admissions staff. The company said in October it would discontinue compensating employees based on enrollment results as it works to smooth over criticism about its recruiting practices.

Apollo posted better-than-expected fiscal fourth quarter earnings of $1.31 per share. Current fiscal-first quarter profits, due to be reported on Jan. 10, 2011, are expected to come in at $1.35 per share. If results are in line with expectations it would represent a 12.3% decline from year-earlier EPS of $1.54.

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ITT Educational Service had a subpar 2010, underperforming much of its sector peers and the overall market.

Think tank Education Trust, in its report on staggeringly low graduation rates at U.S. for-profit colleges and universities , showed that ITT actually fared better than most in the group with a 66% six-year graduation rate.

The operator of ITT Technical Institute and Daniel Webster Colleges said in October its new student enrollment fell for the first time in several years. ITT Educational Services said new student enrollment fell 3.9% to 26,664 in the recent quarter, compared with 27,738 in the year-earlier quarter. Revenue per student fell by 2.5% to $4,730. Total student enrollment increased 11.1% to 88,004.

ITT posted better-than-expected third quarter earnings of $2.82 per share , but revenue of $400.6 million came up short.

The for-profit education sector has been experiencing "a hard reset," said Herb Greenberg on CNBC at the time, and that ITT was the latest to confirm that trend after Apollo Group warned during the prior week that its enrollment would be down more than 40% in fiscal 2011's first and second quarters.

Still, ITT maintained its 2010 earnings forecast for earnings per share in a range of $11 to $11.35. Analysts' consensus call is for earnings of $11.12 per share for the year, down from a prior consensus for full-year EPS of $11.19.

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Education Management was mum on the topic of newly proposed Department of Education regulations when reporting its recent quarterly results, even as industry peer Lincoln Educational Services ( LINC), which reported its results earlier the same day, said it was operating on the assumption that some version of those rules will be enacted in 2011, and that it will have an impact on its profitability.

Education Management booked growth in year-over-year fiscal first quarter profits and revenue, beating expectations, but forecast current quarter results below the Street's call. Revenue came in at $666 million, up 24.6% from year-earlier revenue of $534.4 million. The sharp increase was driven primarily by a 23.1% increase in July student enrollment, the company said. Net income soared 131.2% to $36.4 million, or 25 cents per share, compared with year-earlier profits of $15.8 million, or 13 cents per share.

Total student enrollment at the start of the current quarter was 158,300 students, a 16.4% increase from a year ago. The number of students enrolled in fully online programs increased 35.7% to over 42,300 students.

Education Management said it expects net income in its 2011 fiscal second quarter, which ends this month, to be in a range between $85 million and $88 million; EBITDA, or earnings before interest, taxes, depreciation and amortization, to be in a range between $203 million and $209 million, and earnings per share in a range between 60 and 62 cents per share. Wall Street expects current quarter net profits of $86.8 million, EBITDA of $206.8 million, and EPS of 61 cents per share.

On Dec. 10 Education Management said it increased the size of its stock repurchase program by 300% , from $50 million to $150 million, and extended the term of the program to Dec. 31, 2011. Education Management launched the stock repurchase program on June 11 and has repurchased 4.2 million shares to date at a cost of $50 million, the company reported.

On Dec. 21 the company said its subsidiary, Stauzenberger College Education , which owns Brown Mackie College locations in Louisville and Hopkinsville, Ky., as well as another location in Ohio, received a subpoena from the Office of Consumer Protection of the Attorney General of the Commonwealth of Kentucky.

The subpoena requested documents and details for Stauzenberger's operations between Jan. 1, 2008 through the end of the 2010 calendar year. The filing said the Kentucky Attorney General's previously announced investigation of for-profit colleges' business practices included issuing subpoenas to six other schools in Kentucky.

Education Management said it intends to cooperate with the investigation.

Education Management's Brown Mackie College in Fort Mitchell, Ky. is not owned by Strauzenberger, the company said in a filing with the Securities and Exchange Commission.

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Strayer Education, like Corinthian's Everest colleges, averaged student loan repayment rates in the low 20s last year, according to research from the Institute for College Access and Success, a student-advocacy group. At those levels, Strayer would be ineligible for federal aid if proposed regulatory legislation is enacted.

Strayer recently beat third-quarter expectations thanks to increased student enrollment and higher tuition. The for-profit education company also announced a 33% increase to its annual dividend from $3 to $4, to be paid on a quarterly basis. The higher quarterly dividend of $1 per share was paid Dec. 10.

Strayer posted net income of $23.3 million, or $1.72 per share, compared with year-earlier earnings of $16.7 million, or $1.21 per share. Revenue jumped 29% to $147.6 million, from $114.4 million.

Strayer said enrollment at its Strayer University for the 2010 fall term increased 12%. Across its campus and online system, continuing student enrollments increased 17% while new student enrollments decreased 2%.

Strayer forecast current quarter EPS in a range between $2.64 and $2.66, well below expectations for fourth-quarter EPS of $2.99. Analysts' EPS consensus has since come down to $2.67. Strayer's full-year guidance for EPS in a range between $9.63 and $9.65 also came up short. Analysts had been expecting 2010 EPS of $9.93, and later revised the figure to $9.64.

The post-secondary education provider said it plans to open eight new campuses next year and implement a 5% tuition increase effective January 2011. Strayer forecast 2011 earnings of up to $11.50 per share assuming a 13% increase in annual student enrollment at Strayer University in 2011.

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Based on year-to-date returns, DeVry fared toward the middle of the pack in 2010. The school operator took advantage of the recent pressure on its stock price, using cash reserves of $32.3 million, $43.7 million and $17.4 million during fiscal 2008, 2009 and 2010, respectively, for share buybacks and payment of dividends.

DeVry said in late October that it earned $74 million , or $1.03 per share, in its 2011 fiscal first quarter. Revenue came in at $521 million. Both top- and bottom-line results beat expectations.

DeVry did not offer specific earnings guidance but warned that it expects fewer students to enroll in its undergraduate programs at DeVry University, echoing similar cautionary statements from Capella Education ( CPLA), Apollo Group and ITT Educational Services. "DeVry University expects to report a modest decline in new undergraduate student enrollments and growth in the mid-teens for total students," the company said.

Wall Street's consensus call is for current quarter EPS of $1.19 on revenue of $549.5 million. Full-year EPS is expected to come in at $4.52 with annual revenue of $2.21 billion.

The Education Trust said DeVry's six-year graduation rate was 31%. The Institute for College Access and Success reported that its students averaged loan repayment rates of 40% last year.

DeVry is the parent organization of Advanced Academics, Becker Professional Education, Carrington College and Carrington College California, Chamberlain College of Nursing, DeVry Brasil, DeVry University and Ross University.

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Career Education took advantage of the pressure on its stock price this year, increasing its share buyback program and establishing an $80 million 10b5-1 plan , adding to an existing $290 million authorization.

A purchase of the entire amount near its current stock price would add one-third to BMO Capital Markets analyst Jeffrey Silber's 2011 earnings-per-share estimates, he noted. Even so, Silber maintained a market perform rating on the stock.

On Nov. 2 Career Education grew third-quarter profits to 33 cents per share, up from 25 cents in the year-earlier period. New student enrollment rose 6% in the quarter.

Career Education said it was working to improve the quality of its student outcomes, but forecast lower student enrollment as it moves to alter some of its programs and recruiting practices, part of its effort to reduce student debt and boost graduation rates.

"In the fourth quarter, we will continue to face more challenging comparable data points from 2009 and the softening enrollment trends while also preparing for potential business changes," a Career Education executive said on its earnings conference call in early November.

The operator of colleges and universities under the American InterContinental University, Colorado Technical University, International Academy of Design & Technology and Le Cordon Bleu College of Culinary Arts brands said it will not be unable to meet its long-term 2011 targets, having forecast revenue growth of 8% to 10% between 2011 and 2014.

Wall Street's consensus call is for Career Education to book 2010 earnings of $2.62 per share on revenue of $2.14 billion. If results are in line it would represent a nearly doubling of year-over-year EPS, and 16.3% growth in year-over-year revenue.

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For its most recently reported quarter, Capella Education booked an increase in profits and revenue. For the first nine months of the year revenue grew 29.7% to $311.4 million. Year-to-date net income surged 56% to $43.2 million, or $2.55 per share.

Even so, the uncertainty surrounding proposed regulatory changes for the for-profit sector led Capella to warn of slowing enrollment growth, cautioning that "new enrollment is anticipated to be slightly down from fourth quarter 2009, due to an increasingly challenging external market environment." Revenue was also expected to slow, the company said in its third-quarter earnings release.

The online postsecondary education services company also said it would tighten enrollment practices for its bachelor program. CEO Kevin Gilligan said undergraduate students who had not attended any prior higher-education school would have to go through an assessment processes before being allowed to enroll. Undergrads make up about 20% of Capella's total student roster.

"Everybody is going through the same issues," said Sterne Agee' Bhatia at the time. "They are all finding it harder to get higher quality students." Bhatia, who had a neutral rating on Capella shares, added that, "this is not a one-quarter trend either. This is going to continue for the next 3-4 quarters."

Capella forecast current-quarter student enrollment growth in a range between 16% and 17%, from third-quarter growth of 25.7%. Revenue is expected to grow as much as 22%, after increasing 26% in the prior quarter.

Analysts from Zacks Investment Research upgraded their rating on Capella Education to neutral, from underperform, with a price target of $69.

"Capella Education's strong focus on working adults and exclusive online education has enabled it to become a prominent player in the for-profit post-secondary education industry. The company's sustained efforts to expand educational programs helps it to boost enrollments, and in turn, the top line," Zacks wrote, pointing out the CPLA's total enrollment soared 25.7% year-over-year, boosting quarterly revenue by strong double digit percentages.

Still enrollment in the third quarter decelerated sequentially and is expected to fall further in current quarter "reflecting a soft increase compared with previous quarters."

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Washington Post is somewhat of an outlier in the for-profit education sector. It is a media company, operating cable television systems, newspapers like The Washington Post, and magazines such as Newsweek. It fits in the for-profit education category by way of its Kaplan subsidiary.

Kaplan's student loan repayment rates came in at a weighted average of 28% last year, the company said. At that level, Kaplan, along with Strayer and Corinthian's Everest colleges, would be ineligible for federal aid if recently proposed legislation is enacted.

In its Nov. 5 quarterly earnings release, Washington Post said its Kaplan higher education business planned to launch a program dubbed the "Kaplan Commitment," allowing students a "risk-free period" of enrollment in its programs. WPO warned the new program "could have a material adverse effect on Kaplan's operating results."

WPO's quarterly revenue growth of 7% and operating income growth of 75.1% was attributed, in part, to improved operations in its education division. For the first nine months of the year WPO's education division revenue grew 14% to $2.2 million. Kaplan reported operating income growth of 130.9%.

Commenting on proposed regulations for the for-profit sector, WPO said it could not accurately predict the impact those rules would have on its Kaplan business but said that if the rules were enacted as proposed it would " significantly impact Kaplan's operating results" and may require it to "limit program offerings to ensure compliance with the restrictions of the proposed gainful employment rule."

On Dec. 27. Kaplan announced it acquired J.Y. Monk , a North Carolina-based provider of real estate licensing and continuing education, making it the largest provider of broker exam prep programs and real estate licensing and continuing education in the state.

J.Y. Monk will be folded into Kaplan's professional education division, offering education to businesses and individuals in the accounting, insurance, securities, real estate, financial planning and information technology industries.

Quarterly EPS came in at 28 cents, a penny below expectations. Grand Canyon forecast 2011 EPS in a range between $1.30 and $1.50 per share, on revenue between $500 million and $510 million.

Grand Canyon forecast fourth-quarter earnings between 31 and 33 cents per share on revenue of $104 million to $106 million. It expects quarterly student enrollment growth of 14% to 19%.

Wetenhall expects total student enrollment for the current quarter to be 43,606, up 16% from a student roster of 37,709 in the fourth quarter of 2009. Fourth-quarter revenue is expected to grow 36% year-over-year, the analyst noted; pricing is expected to be up 21%, reflecting Grand Canyon's "switch to a four-credit hour model from a three-credit hour model."

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American Public Education could be ripe for a private equity takeover, according to some analysts. "We have had at least one conversation with private equity investors about every post-secondary name we cover, as well as some we don't," BMO Capital Markets analyst Jeff Silber told Reuters.

Bruce Eatroff, partner at private equity firm Halyard Capital, told the newswire that deal valuations would largely depend on schools' dependency on federal student aid, and that schools with less federal aid need would be more attractive targets.

In its recent quarterly report, American Public said proposed industry regulations would have minimal impact on it. The postsecondary education provider forecast current quarter revenue growth on an 18% to 20% jump in net course registrations from new students.

APEI's average student loan repayment rate was 47% last year, according to the Department of Education, better than most of its sector peers. The school operator said it had 77,700 students as of Sept. 30, a year-over-year increase of 31%.

Total revenue for the first nine months of the year grew 35% to $141.9 million. Net income increased 30% in the period to $20.3 million, or $1.07 per share.

APEI focuses on the needs of the military and public service communities through its American Military University and American Public University.

Total student enrollment increased 40.6% year-over-year. Combined new student enrollments for the third quarter increased 23.1%.

Bridgepoint forecast current quarter student enrollment would fall as much as 7% sequentially. It forecast full-year revenue in a range between $700.3 million and $702.8 million, and net income in a range between $120.8 million and $122.3 million, or between $2.02 and $2.05 per share. The company's guidance compares with analysts' expectations for 2010 earnings of $1.98 per share on revenue of $691.7 million.

Student starts rose 23% in the third quarter, easing from a pace of 55% in the year-earlier period. "We like the slower start growth, given the perception that fast growth was going to drive execution or policy risk higher," said William Blair analyst Brandon Dobell.

Bridgepoint should face less of an impact from new rules because its students pay their loans back at a better rate than many of its peers.

Wetenhall expects Bridgepoint to post current-quarter enrollment growth of 35%, his best-performing stock by that measure by far. (At the far end of the spectrum he expects Apollo Group to report a 4% decline in current quarter student enrollment.)

Wetenhall noted that concerns about Bridgepoint's enrollment growth limits his "enthusiasm" for the stock. He maintained a sector perform rating on Bridgepoint and raised his price target by $1 to $18.